We expect online retailer eBay Inc. (EBAY) to beat expectations when it reports fourth quarter 2012 results on January 16th.

Why a Likely Positive Surprise?

Our proven model shows that eBay is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The Earnings Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 3.28%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The sell-rated stocks (Zacks Rank #4 and #5) should never be considered going into an earnings announcement.

The combination of eBay’s Zacks Rank #2 (Buy) and 3.28% ESP makes us very confident about looking for a positive earnings beat on January 16th.

What is Driving the Better than Expected Earnings?

eBay’s impressive business strategy, strength atPaypal, opportunities in the fast-growing mobile space, restructuring at its PayPal business unit and overall strength in eCommerce are expected to drive results in the upcoming quarter.

PayPal, which accounts for almost half of eBay’s annual revenue, is expanding beyond its online payments service. PayPal’s point of sale (POS) represents an incremental growth driver, given its focus on the top 20 national retailers, a few of which have already agreed to accept PayPal as a payment mode. eBay’s agreement with Discover has also opened up PayPal access to more than 7 million merchant locations, expanding its addressable market.

As smartphone migration continues, eBay is seeing great opportunities in the mobile space. The PayPal Mobile Express Checkout system and the Zong acquisition will boost the company’s mobile payment volumes. According to management, PayPal expects to process $10 billion in mobile payments this year.

The positive trend is seen in the trailing four-quarter average surprise of8.83%.

Other Stocks to Consider

eBay is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 2 industry peers: